Court File and Parties

COURT FILE NO.: CV-22-00691216-0000 DATE: 20230424 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: SELVARATHANI CHANDRAMOHAN, Plaintiff AND: SUSHMITA SHOME, Defendant

BEFORE: Justice A.P. Ramsay

COUNSEL: Thaya PK Kandiah, for the Plaintiff HEARD: In Writing

Endorsement

A. Overview

[1] This is a straightforward mortgage action. The plaintiff commenced this action on December 5, 2022, seeking payment of $105,919.56, plus interest, and possession of the property. The statement of claim was served on December 5, 2022. The defendant did not deliver a statement of defence within the timeline prescribed by the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), and was noted in default. An affidavit of service filed indicates the Requisition was served at the same time as the Motion Materials.

B. Nature of the Motion

[2] The plaintiff moves for default judgment in this mortgage enforcement action pursuant to r. 19.05 of the Rules. The motion is made on notice to the defendant, and in accordance with the best practices endorsed by this court: see Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at para. 10; Casa Manila Inc. v. Iannuccilli, 2018 ONSC 7083, at paras. 11-17.

C. Background

[3] On July 15, 2020, the plaintiff, Selvarathani Chandramohan, as mortgagee, entered into a mortgage with the defendant, Sushmita Shome, as mortgagor for the sum of $85,000.00. The loan bore interest at a rate of 12.99% per annum and was for a one-year term, starting on August 15, 2020. The loan was secured against the defendant’s property located at 45 Pitt Ave, Scarborough, Ontario. The statement of claim pleads that the mortgage was registered as Instrument No. AT5475200 in the Land Registry Office for the Land Titles Division of Toronto (No. 80). This was the second mortgage on the property.

D. Analysis

[4] The plaintiff deposes that the defendant has not paid the renewal fee. On the materials filed, the mortgage went into default on March 15, 2022. The default in payment continued and no payment has been made thus far. The plaintiff pleads that: “The Defendant failed to make her March 15, 2022, mortgage payment in the amount of $920.13 and despite multiple attempts, the mortgage arrears have not been paid.”

[5] Paragraph 1(a) of the statement of claim states that the plaintiff is seeking “payment of the amount of $105,919.56 due under covenant contained in a mortgage described herein”. The plaintiff deposes in her affidavit that a Notice of Sale was issued on October 25, 2022, and, at the time, the defendant owed $105,919.56 consisting of:

a. The principal amount of $85,000 b. Interest totaling $4,601.06 c. $8,000 renewal fee d. $300 NSF fee e. $5,000 failure to discharge fee f. $250 statement preparation fee g. $2,768.50 for legal fees and disbursements, inclusive of HST

[6] I am satisfied that the plaintiff is entitled to default judgment for the principal amount of $85,000.00, plus prejudgment interest at the rate of 12.99% per annum, but I am not satisfied, on the pleadings and on the evidence, that the plaintiff has proved her entitlement to the renewal fee, NSF fee, and discharge fee, for the following reasons. The Mortgage/Charge refers to the Standard Charge Terms 200033. That document is not before the court nor is there any indication that it was provided to the defendant.

[7] Subrule 19.05(1) of the Rules states:

Where a defendant has been noted in default, the plaintiff may move before a judge for judgment against the defendant on the statement of claim in respect of any claim for which default judgment has not been signed.

[8] Pursuant to subrule 19.02(1)(a) of the Rules, a defendant who has been noted in default is deemed to admit the truth of all allegations of fact made in the statement of claim. The mortgage agreement and registration on the defendant’s property, as well as the terms of the mortgage are pleaded in paragraphs two to seven of the statement of claim. At paragraph nine, the plaintiff alleges that the defendant failed to make her March 15, 2022, mortgage payment. In the result, the deemed admissions which flow from the facts pleaded in the statement of claim entitle the plaintiff to judgment for the mortgage loan and interest. The deemed admissions are further supported by the affidavit evidence of the plaintiff which refers to the charge/mortgage that is registered on title.

[9] However, it is well established that the facts must entitle the plaintiff to judgment. Rule 19.06 of the Rules states:

A plaintiff is not entitled to judgment on a motion for judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment

[10] The Notice of Sale includes items for “deferred interest” and “missed payment”. No explanation is provided for the latter, but the former appears to relate to an additional three months of interest. The Notice also includes various administrative fees, the renewal fee, and a failure to discharge on maturity fee. The plaintiff must be legally entitled to the damages claimed. The plaintiff has not addressed whether those payments would be enforceable given s. 17 of the Mortgages Act, R.S.O. 1990, c. M. 40 and s. 8 of the Interest Act, R.S.C. 1985, c. I-15. Under section 17 of the Mortgages Act, a mortgagor in default of payment of the principal, may repay the principal by either giving the mortgagee three months’ notice or interest in lieu of payment: Mastercraft Properties Ltd. v. EL EF Investments Inc. (1993), 32 RPR (2d) 312, 14 O.R. (3d) 519 (Ont. C.A.). As the plaintiff has commenced an action to enforce its rights under the mortgage in default, the plaintiff is only entitled to interest owing on the principal pursuant to s. 17 of the Mortgages Act: Ialongo v. Serm Investments Limited (2007), 54 R.P.R. (4th) 310 at para. 30, Cardill Inc. v. Rathcliffe Holdings Limited, 2018 ONCA 672 at para. 6; Re Shankman and Mutual Life Assurance Co. of Canada (1985), 36 RPR 125, 52 O.R. (2d) 65 (Ont. C.A.).

[11] As for the other amounts claimed, at paragraph eight of the statement of claim, the plaintiff pleads that the mortgage was renewed for a one-year term on July 15, 2021, subject to a renewal fee of $8,000.00 which has not been paid. A review of the affidavit evidence of the plaintiff indicates that the plaintiff’s evidence is not consistent with the facts pleaded in the statement of claim. The “Second Mortgage Commitment” form before the court dated July 10, 2020, is with respect to the initial loan; the document indicates that there was a “lender’s fee of 8,500”. That document is not signed by the plaintiff, and there is no evidence before the court that the signature on the document is that of the defendant. Neither is there any evidence before the court that the mortgage was renewed with an agreement, by the defendant, to pay a $8,000.00 renewal fee.

[12] I am therefore not satisfied that the facts pleaded in the statement of claim entitle the plaintiff to a renewal fee of $8,000.00. There is no documentary evidence of any such agreement, only a bald statement by the plaintiff. It is also not clear whether the renewal fee would have the effect of increasing the interest rate, and if so, what legal consequences may flow from such a result; that is to say, would the renewal fee be enforceable? Would it constitute a “fine”, “penalty” or a “rate of interest” charged on arrears thereby contravening s. 9 of the Interest Act? The section provides that:

No fine, penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.

(2) Nothing in this section has the effect of prohibiting a contract for the payment of interest on arrears of interest or principal at any rate not greater than the rate payable on principal money not in arrears.

[13] The plaintiff also seeks recovery of a $5000 “failure to discharge on maturity” fee. In my view, the renewal fee and amount claimed for default in paying off the mortgage at maturity would amount to a penalty as they would result in increasing the interest on the arrears beyond the mortgage rate in contravention of s. 8 of the Interest Act.

[14] There are other reasons why I would not enforce the failure to discharge fee, and, for that matter, the $300 administrative fee related to NSF cheques. The plaintiff pleads in the statement of claim that the “mortgage provides that the mortgagee is entitled to a fee of $300.00 for each missed, late, or returned payment due under the mortgage” and that the “mortgage provides that the mortgagee is entitled to charge a fee of $5,000.00”. In her affidavit, the plaintiff deposes that under the mortgage and Mortgage Commitment she is entitled to a fee of $300.00 for each missed, late, or returned payment due under the mortgage and a fee of $5,000.00 if the defendant failed to repay the mortgage on maturity. The plaintiff does not refer to any provision in the statement of claim or her affidavit which supports this claim, but a review of the materials filed indicates that the Second Mortgage Commitment before the court refers to “Standard Charge Terms: $300 NSF-Returned Payment Fee; Payable for each NSF cheque”. The Standard Charge Terms are not before the court nor is there any evidence that the defendant received it, but Schedule “A to the mortgage includes a clause that the mortgagee shall charge an administration fee for any NSF cheque of $300. The $5,000.00 fee is only referred to in the Second Commitment Letter, which only bears a signature of one unknown party and is not signed by the plaintiff. I would therefore not give effect to the document.

[15] On a motion for default judgment, the plaintiff must still prove their claim for damages. In Fuda v. Conn, Himel J. commented, at para. 16:

[A]lthough the Rules provide the consequences for noting in default, the court has the jurisdiction and the duty to be satisfied on the civil standard of proof that the plaintiff is able to prove the claim and damages. If the court finds the evidence to be lacking in credibility or lacking "an air of reality", the court can refuse to grant judgment or grant partial judgment ….

[16] There should be some facts pleaded and other evidence which support the administrative fees. There is none before me. These claims should be supported by actual supporting evidence. In BMMB Investments Limited v. Naimian, 2020 ONSC 7999, 30 R.P.R. (6th) 324, Myers J. was faced with a similar situation whereby the claimed disbursements by the mortgagee were not supported by invoices. He explained that there was no basis for the court to determine whether the costs were incurred or were reasonable. At paras. 27-28, Myers J. commented:

It does no injustice to any plaintiff to require it to adduce evidence to support disbursements for which it claims reimbursement. As no evidence is adduced by the plaintiff to support any of the costs for which it claims reimbursement, none is allowed.

[17] As for the $300.00 administrative fee, the Notice of Sale refers to an NSF cheque, but there is no evidence before me to establish that the defendant provided an NSF cheque. In fact, the statement of claim pleads that the defendant failed to make her payment on March 15, 2022. The Notice of Sale also refers to a fee of $866.00 for “Missed Payment-March 15, 2022”. There is therefore inconsistency between the facts pleaded, the evidence of the plaintiff in her affidavit, and the exhibit referred to in her affidavit, being the Notice of Sale, which is before the court. Finally, with respect to the legal fees and disbursements claimed in the Notice of Sale and the pleading, there is no supporting evidence before the court.

[18] I assume the $250 claimed for the “statement preparation fee” relates to the Notice of Sale, which is before the court.

E. Conclusion

[19] There is no discharge statement before the court, and, accordingly, it is difficult to determine what the actual principal amount is and the amount of interest to date. The evidence before me is that the mortgage was paid until it went into default in March of 2022.

[20] Counsel for the plaintiff shall submit a discharge statement with the draft judgment to be signed by me.

F. Disposition

[21] Judgment is granted to the plaintiff in the amount of 85,000.00, subject to any adjustment based on the discharge statement.

[22] The plaintiff is entitled to $250 for the statement preparation fee.

[23] The plaintiff is entitled to prejudgment interest at a rate of 12.99% to the date of judgment.

[24] The plaintiff is entitled to possession of the mortgaged land described in the statement of claim.

[25] The plaintiff is entitled to post judgment interest at a rate of 12.99%.

G. Costs

[26] The defendant shall pay costs to the plaintiff in the amount of $2,450 plus HST of $318.50.

A.P. Ramsay J. Date: April 24, 2023